Getting a quick return investment on your rental property is important. Rental property owners do not want their properties to sit empty for weeks or even months on end. However, one of the key components to making money on your rental property is protecting your investment. You do not want to chance renting to someone that will cause damage to your property and evicting tenants is never ideal. So how can you avoid this? Take the time to go through applicants and find a good person to rent your property. Need help identifying one? Here are a few ways to tell.
What Characteristics Make A Good Tenant?
Choosing a tenant is essentially a business decision. While it can be easy to rent to applicants that you seem to have a quick connection with, you should instead focus on finding ones that meet all the criteria. Identifying the right tenant will make the difference in a property that is occupied and profitable versus one that is vacant and a money pit. The average cost to evict someone is well over $3,000. So when you are forced to remove tenants from your property, it will not only cause you to miss out on a few months rent, it will also cost a hefty fee just to get them out. As you review applications, here are a few things to keep in mind.
Income: Are They Able to Afford Your Monthly Rent?
The pandemic had quite the impact on renters’ ability to pay their monthly rent– over 30% were negatively impacted. As a result, 31% of rental properties’ profitability took a hit. This is why it is more important than ever before that you make sure that renters are financially able to pay their rent. You should narrow down your applications to tenants that are making at least three times the monthly rent. Be sure to verify this with their pay stubs prior to renting the property.
Credit And Background Checks
Credit scores are another factor to consider when finding a good tenant. While they might not always give you the whole picture, it does provide some insight on their financial behaviors including their debt to income ratio. Credit scores will also show you whether or not the applicant has ever filed bankruptcy or been evicted.
As a property owner, you are able to use one of the following credit bureaus to look at an applicant’s credit score: TransUnion, Experian, or Equifax. You will simply need to create an online account with one of these bureaus. Any fees that you are charged, you can pass on to applicants in their initial application fee. Once the bureau of your choice has verified your identity, you will complete a short credit check request form. When the report is ready to view, you will be able to look at your prospective tenant’s credit report online. Each credit bureau may show different depths of information.
Look for accounts that have consistently been paid on time, a reasonable debt to income ratio, and a stable employment history. Look for applicants that have a credit score at or above 620. Credit scores below this may indicate that your applicant poses a financial risk.
You may also be able to use the credit bureau to complete your applicant’s background check. Background checks will provide information pertaining to an applicant’s criminal history, address history, and any known aliases. This information can be useful if you narrow down your options to just a couple applicants. It is important to note that in some states it is illegal to reject an application solely based on an applicant’s criminal history.
The Legal Stuff
Prior to searching for future tenants, make yourself familiar with local, state, and national laws pertaining to renter and landlord rights. You might consider consulting with a lawyer in order to build your understanding of such laws.
The Fair Housing Act
Federal fair housing laws prohibit landlords from rejecting applicants based on their age, race, color, religion, sex, nationality, family status, and/or any mental or physical disabilities. Should you reject an applicant for any other reason, such as a poor credit score or rental history, the Fair Credit Reporting Act requires you to inform the applicant. In addition, if someone with a physical disability applies to rent your property, you must provide any necessary accommodations for them.
Local And State Laws
Additional provisions for landlords and tenants can be found in local and state laws. You can find a list of these laws for your state online. These laws will go over everything from where you are allowed to hold a security deposit to whether or not you must provide notice prior to entering the property once tenants have claimed occupancy.
How To Attract The Right Tenants
Now that you are aware of what to look for in a tenant, you can shift your focus to how to attract residents that will value your property almost as much as you do.
Creating Your Listing
There is a right way to create a perfect rental listing. At the very least, each listing should include information that tenants will need to decide whether or not your rental property meets their needs. This includes:
- Monthly Rent Cost
- Number Of Bedrooms
- Number Of Bathrooms
- Maximum Occupancy Number
- Deposit Amount
- Policy On Pets
- Your Contact Information (Or That Of Your Property Manager)
After you have listed all of these fundamental details, you can then get creative to make your property stand out to the right tenant. A catchy title can evoke the image of what your property looks like which can be emphasized in the photos you attach to the listing. And just like that, your applicants will be able to envision themselves living in their new home.
The body of your listing needs to be original as this will set your property apart from others in the area. If you have recently remodeled any area of the property, be sure to include that. Vaulted ceilings are also an attractive feature that will attract applicants. Include as many details as you can.
While your listing will include nice pictures of the space, how you write your listing can create an emotional reaction that will intrigue prospective tenants. This stage of the process is where you are basically convincing applicants that your property has more to offer than other available properties. I mean how else would they know that if you didn’t tell them?
Listing Sites And Social Media
The majority of real estate investors prefer their listings to be online. In this very digital world, this is likely no surprise. While you can still post in your local newspaper, renters are spending more time trying to find their future home online. If you have decided to list your property yourself, there are several online listing resources available at your disposal. Here are just a few of those:
- Zillow – As one of the largest databases for rental homes and properties online, Zillow is a great resource for landlords. Zillow provides landlords with built-in screening tools and their mobile app is user friendly. In addition, there is the benefit of name recognition for those looking to rent which means it will be seen by more prospective tenants.
- Apartments.com – This site features apartments, townhomes, condos, and houses for rent. It requires prospective tenants to apply on its app which really forces applicants to consider whether or not they are interested in the property. You are sure to have more serious applicants who are motivated and ready to lease because of it.
- Craigslist – Today, Craigslist might not be your first choice to list your rental. But if your tenant pool consists of college students or younger individuals in their twenties, this site can be beneficial. It receives millions of visitors monthly and although it might not have all the bells and whistles, it has proven to do an effective job.
- Zumper – Zumper has a reach of over 13 million renters– yes, you read that right, 13 million. Renters are pre-screened with credit reports, background checks, and applications. Landlords can use the platform to collect their monthly rent and interface with tenants. If you own multifamily units, you can benefit from Zumper’s continuous support provided by a dedicated Account Manager.
- Hotpads – Hotpads is similar to Zillow in how it works. Landlords can actually use the Zillow Rental Manager to run their Hotpads listing. This site will allow prospective tenants to compare prices and amenities of properties side by side. It can help narrow down their choice and ensure that you are only receiving applications from those who are really interested in your property.
Using A Leasing Agent Or Realtor
You shouldn’t have to do all the work when finding tenants for your property. Instead, use a leasing agent or realtor to alleviate some of the strain that comes with finding solid leads. Qualified realtors can take on marketing and advertising tasks. They will also spend time with prospective renters as they guide them in their search for the right place to call home. Meeting with potential tenants and showing the property, your realtor will be able to separate those who are ready to rent from those who are just out looking. Realtors will charge a fee for their services and while some landlords pay this out of their own pocket, others charge their tenants a broker fee. If you want to work with a realtor, this is something you will need to decide.
Showing Your Property
Once people have started showing interest in your property, it is time to show it. This is a critical part of the leasing process. You’ve put in a lot of work into listing your property and attracting applicants– now it’s time to go the extra mile. Be sure that your property is cleaned. In many multi-family units, there is usually a model space to tour that is well staged so that prospective tenants can see the space put together. If your rental is currently occupied, you might consider offering to pay for cleaning services before showings.
While conducting the showing, be sure to point out the benefits of your rental. While your listing likely includes the high points, this is your opportunity to go into great detail face to face. Does your property offer plenty of natural light? Mention that. In-unit laundry? Major perk that tenants will love. But don’t limit your discussion to only your property’s perks. Talk about the neighborhood, the school district, local hotspots– all of these are great selling points. You might also share testimonials from previous tenants to provide your tentative tenants with some reassurance that your space is the one.
Hiring A Property Manager To Make The Process Easier
A great amount of work goes into finding the right tenant– it can be quite overwhelming. There’s the process of creating and posting your listing, reviewing numerous applications, setting up showings, and then writing up a lease that covers everything. If you think that seems like more than you want to handle, you are not alone. Over 70% of rental property owners want a property manager to handle their easing and marketing responsibilities.
Property managers can assist you in marketing your rental, screening prospective tenants, cleaning and showing the space, drafting your lease, and even handle any requests tenants may have while renting from you.
By getting it right the first time, you can save yourself a lot of headache. No one wants to deal with eviction or a long list of repairs from a destructive tenant. So whether you do this all on your own or you decide to hire a property manager, making money starts with finding the right tenant that will treat your property like home and stay there for years to come.
Finding the right tenant becoming a challenge? Call Real Property Management. We would love to make being a rental property owner easy.
Contact us (866-500-6200) for more information today!
About Real Property Management Midwest
We are local property management experts serving Cincinnati, Dayton, Columbus, & Louisville. We manage Single-Family Homes, Apartment Buildings, and Condos. With years of experience, Real Property Management is Cincinnati, Dayton, Columbus, Louisville and Northern Kentucky’s #1 Property Management and Leasing Company.